This trading glossary covers the terms you will meet most often in forex, stock and crypto markets, and in the small print of trading platforms. Where a term has a safety angle, the definition says so. Jump to a letter below, or follow the links to our longer guides.
- Address poisoning
- A crypto scam in which a fraudster sends a tiny transfer from an address that closely resembles one you use, hoping you will later copy it from your transaction history by mistake. Always copy addresses from the original source. See USDT explained.
- Ask price
- The price at which a platform will sell to you, so the price you pay when you buy. It is always slightly higher than the bid price, and the gap between the two is the spread.
- Base currency
- The first currency in a forex pair. In GBP/USD the pound is the base currency, and the quoted price tells you how many US dollars one pound costs.
- Bid price
- The price at which a platform will buy from you, so the price you receive when you sell. It sits just below the ask price.
- Blockchain
- A shared ledger made of linked blocks of transactions, copied across many computers so that no single party controls the record. Changing an old entry would break every block after it. See how crypto works.
- Bull and bear market
- A bull market is a period of broadly rising prices; a bear market is a period of broadly falling prices, often defined as a fall of 20% or more from a recent high. Neither label says what happens next.
- Clone firm
- A fraudulent business that copies the name, address or registration number of a genuine authorised firm. The register entry is real but the website or phone number differs. Check contact details against the regulator's register.
- Contract for difference (CFD)
- A leveraged contract with a provider that pays out the change in an asset's price between opening and closing. You never own the underlying asset. UK and EU retail CFDs have leverage caps and negative balance protection.
- Custody
- The safekeeping of assets on someone's behalf. A broker or exchange that holds your shares or coins has custody of them, and how it does so decides what happens if it fails.
- Dividend
- A payment a company makes to its shareholders out of profits, usually in cash. Dividends can be cut or cancelled at any time. See the stock market for beginners.
- Exchange-traded fund (ETF)
- A fund whose shares trade on a stock exchange like a single company's shares, usually tracking an index or a basket of assets. It spreads money across many holdings in one purchase.
- Free margin
- The part of a trading account's equity not being used as margin for open positions. When it approaches zero, even a small adverse move can trigger a margin call or automatic close-out.
- Gap
- A jump in price between one trade and the next with no trading in between, often at a market's open after weekend or overnight news. A stop-loss can be filled at a worse price after a gap.
- Halving
- The event, roughly every four years, when Bitcoin's block reward is cut in half. The April 2024 halving reduced it to 3.125 BTC. See what is Bitcoin.
- Hardware wallet
- A small dedicated device that stores crypto private keys offline and signs transactions without exposing the keys to an internet-connected computer.
- Index
- A number that tracks the combined value of a group of assets, such as the S&P 500 for large US companies. Index funds aim to match it rather than beat it.
- Know your customer (KYC)
- Identity checks a regulated firm must carry out before opening an account. A platform that asks for no identification at all is unlikely to be regulated where you live.
- Leverage
- Using borrowed exposure so that a small deposit controls a larger position. At 30:1, $1,000 of margin controls $30,000. It multiplies losses as much as gains. See the margin calculator.
- Limit order
- An instruction to buy or sell only at a set price or better. It protects the price you get but may not be filled if the market never reaches your level.
- Liquidity
- How easily an asset can be bought or sold without moving its price. Highly liquid markets usually have narrow spreads; thin markets can have wide spreads and sudden jumps.
- Lot
- The standard unit of forex trade size. One standard lot is 100,000 units of the base currency; a mini lot is 10,000 and a micro lot 1,000. A gold lot is commonly 100 ounces.
- Margin
- The deposit a provider holds back while a leveraged position is open. It is not the maximum you can lose, and it is not a fee.
- Margin call
- A warning that your account equity has fallen close to the margin required for open positions. If it keeps falling, positions are closed automatically; in the UK and EU at 50% of required margin for retail CFD clients.
- Market capitalisation
- The total market value of a company's shares or a crypto-asset's circulating supply: price multiplied by the number in issue. It shows size, not quality.
- Negative balance protection
- A rule that stops retail clients losing more than the money in their account. It applies to retail CFD clients in the UK and EU, among other places.
- Order book
- The live list of buy and sell orders waiting on an exchange at each price. It shows how much could be traded near the current price, which is a direct view of liquidity.
- Pip
- The standard unit of movement in a currency pair: 0.0001 for most pairs and 0.01 for yen pairs. On a standard lot of a USD-quoted pair, one pip is worth $10. See the pip calculator.
- Private key
- The secret number that controls a crypto address. Whoever holds it can move the funds, and there is no one to reverse a transfer if it is stolen.
- Proof of reserves
- An attempt by a crypto exchange to show that it holds the assets it owes customers, often using a cryptographic snapshot. Its value depends on whether liabilities are fully included and independently checked.
- Quote currency
- The second currency in a forex pair, in which the price is expressed. In EUR/USD the US dollar is the quote currency.
- Recovery scam
- A follow-up fraud aimed at people who have already lost money, offering to recover it for an upfront fee. Genuine authorities do not charge victims to pursue their funds. See scam warning signs.
- Seed phrase
- A list of 12 or 24 words that backs up a crypto wallet's private keys. Anyone with the words can take the funds. No genuine company or support agent will ever ask for it.
- Settlement
- The formal transfer of cash and assets after a trade. US shares settle one business day after the trade (T+1); a blockchain transfer settles when it is confirmed on the chain.
- Slippage
- The difference between the price you expected and the price you actually got, common in fast markets and on large orders. It can make a loss larger than a stop-loss suggests.
- Spread
- The difference between the bid and ask prices, paid every time you open and close a trade. It often widens in quiet hours and during major news. See trading fees explained.
- Stablecoin
- A crypto token designed to hold a steady value, usually one US dollar, backed by reserves or other mechanisms. It is not a bank deposit and can lose its peg.
- Stop-loss
- An order that closes a position automatically once the price reaches a set level, to limit losses. It does not guarantee the exit price if the market gaps.
- Swap
- The overnight financing charge or credit on a leveraged forex or CFD position held past the daily rollover at 17:00 New York time. On most platforms Wednesday's is tripled to cover the weekend.
- Volatility
- How widely and quickly a price moves. High volatility means larger potential gains and losses over the same period; crypto is typically far more volatile than major currency pairs.
- Yield
- The income an investment pays as a percentage of its price, such as a dividend yield on a share. A yield that looks far higher than similar investments is a reason for extra caution.